It is well known that waterflooding will create fractures. The created fractures are divided into hydraulic fractures (artificial fractures with proppant) and induced fractures (formed during waterflooding without proppant). There is no proppant in the induced fracture, so it will close as the pressure decreases and extend as the pressure increases. We call it a dynamic induced fracture (DIF). Because of reduced pressure, the DIF will be closed during the shut-in pressure test (well testing). The current conventional well-testing model cannot describe the dynamic behavior of the DIF, resulting in obtaining unreasonable parameters. Thus, this work proposes a DIF model to characterize the DIF behavior during well testing (the injection well will shut in, resulting in a reduction in bottomhole pressure and induced-fracture closure). It is worth noting that a high-permeability zone (HPZ) will be formed by long-time waterflooding and particle transport. The HPZ radius will be greater than or equal to the DIF half-length because the waterflooding pressure can move particles but not necessarily expand the fracture. The point source function method and Duhamel principle are used to obtain the bottomhole pressure response. Numerical simulation methods are used to verify the accuracy of the model. Field cases are matched to demonstrate the practicability of the DIF model. Results show a straight line with a slope greater than the unit, a peak, a straight line with a slope less than one-half, and an upturned straight line on the pressure derivative curve. This peak can move up, down, left, and right to characterize the induced fracture’s dynamic conductivity (DC). The straight line with a slope greater than the unit can illustrate a fracture storage effect. The straight line with a slope less than one-half can describe the closed induced-fracture (CIF) half-length. The upturned straight line can describe the HPZ and reservoir permeability. The obtained parameters will be inaccurate if they are incorrectly identified as other flow regimes. Field cases are matched well to illustrate that identifying the three innovative flow regimes can improve the parameters’ accuracy. In conclusion, the proposed model can characterize the dynamic behavior of induced fracture, better match the field data, and obtain more reasonable reservoir parameters. Finally, two field cases in tight reservoir are discussed to prove its practicality.